Deck 8: Trade and Cash Discounts

Question 1

Phillip Upton receives a $2,450.00 invoice with credit terms of 3 / 20, 1 / 30, N / 40. A 5 3 / 4% penalty is charged for a late payment. If the invoice is dated May 18 and paid June 27, the amount due is $2,590.88.

Answer 1

False

Question 2

When a manufacturer offers a product for sale to a retailer, the amount deducted from the list price is called the:

A) trade discount
B) percent
C) net price
D) complement

Answer 2

A

Question 3

The credit terms 4 / 10, N / 30 means a 10% discount may be taken if the invoice is paid within 4 days of the invoice date.

Answer 3

False

Question 4

The list price minus the net price is equal to the trade discount.

Question 5

A trade discount is the amount deducted from the list price by the manufacturer.

Question 6

Which one of the following months does not have 30 days?

A) June
B) February
C) April
D) September

Question 7

If the buyer is to pay a transportation charge, the following freight terms would be used:

A) freight prepaid
B) free on board
C) FOB destination
D) FOB shipping point

Question 8

Most products go from the manufacturer to the retailer by way of the consumer.

Question 9

Trade discounts can be taken on freight, when freight charges are separate from merchandise on an invoice.

Question 10

Ar-Mel receives an invoice dated March 16 in the amount of $322.50. EOM. If the invoice is paid on April 9, the amount due is:

A) $312.83
B) $316.05
C) $322.50 plus a penalty
D) $322.50

Question 11

If the freight terms are FOB destination, the freight is paid by the seller.

Question 12

72% is the complement of 27%.

Question 13

October 27 is 40 days from December 6.

Question 14

Most products follow the route of going from a manufacturer to a:

A) merchant
B) consumer
C) wholesaler
D) retailer

Question 15

If an invoice is dated April 25 and has credit terms of 3 / 15, N / 45, what is the last date on which the net amount of the invoice can be paid without incurring a penalty?

A) June 12
B) June 11
C) June 10
D) June 9

Question 16

Chain discounts are determined by adding the complements of the chain.

Question 17

An invoice dated April 22 shows a net price of $175 with the terms 3 / 10, n / 30. date the cash discount is allowed?

A) April 22
B) April 30
C) May 2
D) May 1

Question 18

An invoice in the amount of $290.00 with credit terms of 3 / 10, EOM is dated April 27. If it is paid June 9, the amount due is $281.30.

Question 19

A $217 invoice dated September 27 for copying services was received with the terms 2 / 10, EOM. What is the latest date the cash discount is allowed?

A) November 10
B) October 7
C) November 6
D) October 10

Question 20

The offer to reduce the amount of an invoice, to encourage prompt payment, is called a trade discount.

Question 21

A form of credit term is 3 / 15, 2 / 25, N / 40, which means:
I. a 3% discount is allowed if the invoice is paid within 15 days of the invoice date
II. a 2% discount is allowed if the invoice is paid within 25 days of the invoice date
III. a partial payment will not be accepted after the 25th day following the invoice date

A) both I and II
B) I only
C) III only
D) II only

Question 22

Jones Company (located in Baltimore) sold a computer system to Data Point of Chicago for $15,000.00. Terms of the sale were 3 / 15, N / 45, FOB Baltimore. Jones agreed to prepay the freight in the amount of $250.00. Assuming Data Point pays within the discount period, how much will they pay?

A) $14,550.00
B) $14,792.50
C) $14,800.00
D) $14,505.00

Question 23

The complement of of 25 percent is 75 percent or 0.75 in decimal form.

Question 24

If the seller is to pay the shipping costs, the bill of lading will be marked "freight collect."

Question 25

A crdit term of 3 / 15, 2 / 25, N / 45 means you have 25 days from the date of the invoice to receive a 2% discount.

Question 26

A discount of 40 / 35 / 10 would be termed a net decimal equivalent.

Question 27

1 plus the net decimal equivalent rate is equal to the single discount equivalent rate.

Question 28

The amount of credit that should be received when a partial payment is made is calculated by dividing the partial payment by the complement of the discount.

Question 29

An invoice dated November 17 is received with credit terms of 3 / 15, N / 40. The due date of the invoice is December 27.

Question 30

When calculating a trade discount, the difference between 100% and the percent of the discount is called the:

A) cash discount
B) trade discount
C) net price
D) complement

Question 31

The net price equivalent rate is the complement of a trade discount series.

Question 32

100% minus the single discount rate is the:

A) list price
B) complement
C) trade discount
D) net price

Question 33

The discount price is a catalog price which the manufacturer suggests each product should be sold for to the consumer.

Question 34

The credit period is always longer than the discount period.

Question 35

Credit terms of 2 / 15, N / 35 on an invoice dated March 21 means:

A) any payment made after April 25 may be subject to an interest charge
B) the net amount of the bill is due between April 1 and April 25
C) a 15% discount can be taken between March 21 and March 23
D) a 2% discount can be taken between March 21 and April 4

Question 36

An invoice in the amount of $1,195.00 with credit terms of 2 / 10, 1 / 20, N / 30 is dated June 25. If it is paid on July 5, a discount of $23.90 is allowed.

Question 37

In a calendar year (January through December), the two consecutive 31 day months are August and September.

Question 38

If a manufacturer's list price is $946.00 and a single discount rate of 15% is offered, the amount of the trade discount would be $141.90.

Question 39

Willa's Florist receives an invoice for $2,865.00, which includes an $85.00 freight charge, dated October 24. The credit terms are 3 / 10, 1 / 15, N / 30. If the invoice is paid on November 7, the amount due is:

A) $2,572.80
B) $2,752.20
C) $2,837.20
D) $2,942.90

Question 40

An invoice of $420.00 is received with credit terms of 2 / 20, N / 30. If it is paid within the discount period, the discounted amount is $8.40.

Question 41

What is the single discount equivalent of 30 / 20 / 10?

A) 0.504
B) 0.70
C) 0.496
D) 0.30

Question 42

November is a 31 day month.

Question 43

A trade discount is the amount deducted from the list price by the:

A) wholesaler
B) retailer
C) both manufacturer and wholesaler
D) manufacturer

Question 44

FOB Shipping Point means:

A) the seller pays the cost of freight
B) the buyer pays the cost of freight
C) the buyer must contract with his own freight hauler
D) title to the goods remains with the seller until delivery

Question 45

Discounts are allowed to be taken on partial payments.

Question 46

The method used to calculate the net price when you do not want / need to know the trade discount is called the single discount method.

Question 47

Which term best describes the seller paying a freight charge?

A) FOB destination
B) prepay and add
C) free on board
D) FOB shipping point

Question 48

When one discount rate is given on the list price, it is called a single discount equivalent.

Question 49

F.C. Industries has a list price of $16,500.00 for its product. A trade discount of 18% is offered. Based on this information, the net price would be $2,970.00.

Question 50

Based on a 360 day year, a 3% cash discount for 20 days is equal to an annual rate of:

A) 45%
B) 18%
C) 54%
D) 36%

Question 51

An invoice dated June 28 with terms of 1 / 10, EOM results in the end of the credit period on:

A) July 10
B) August 30
C) August 31
D) August 10

Question 52

The single discount equivalent rate of the trade discount 10 / 15 / 30 is:

A) 0.4500
B) 0.5500
C) 0.4645
D) 0.4546

Question 53

100% minus the single discount rate equals the complement of the discount rate.

Question 54

Merchandise with a net price of $1,400.00 and a trade discount rate of 30 percent has a list price of $2,000.00.

Question 55

The complement of 32 percent is:

A) 53%
B) 86%
C) 68%
D) 132%

Question 56

A trade discount increases the purchase price.

Question 57

The net decimal equivalent of 25 / 20 / 20 is 0.01.

Question 58

A discount is an amount of money that is deducted from an original price.

Question 59

The trade discount amount is equal to:

A) the list price times the trade discount rate
B) the list price divided by the trade discount rate
C) the list price minus the trade discount rate
D) the net price times the trade discount rate

Question 60

Another term for suggested retail price is the:

A) neither catalog price or list price
B) list price
C) both catalog price and list price
D) catalog price

Question 61

The difference between the list price and the trade discount is the amount the consumer pays, called the net price.

Question 62

The single discount equivalent is the:

A) complement of the net decimal equivalent
B) same as the net decimal series
C) complement of the single discount rate
D) same as the net decimal equivalent

Question 63

The complement of 30% is 100%.

Question 64

An invoice dated May 18 received by Plumbing Supply indicated a balance of $9,600.00. The balance included a freight charge of $600.00. Terms of the invoice were 2 / 10, 1 / 15, N / 45. Assuming Plumbing Supply pays the bill on May 30, the amount they should pay is:

A) $9,420.00
B) $8,640.00
C) $9,408.00
D) $9,510.00

Question 65

The credit terms, 2 / 10, EOM, means if you pay the invoice within the first 10 days a discount of 2% will be allowed; otherwise the full invoice amount is due at the end of the month.

Question 66

Jud-Jo Distributors received an invoice dated September 22 in the amount of $97.50. The credit terms were 2 / 15, N / 30. A penalty of 6% is imposed for payments made after 30 days. Jud-Jo made a partial payment on October 6 of $50.00 and paid the balance on October 25. What was the amount due?

A) $48.50
B) $49.27
C) $46.48
D) $47.50

Question 67

To find the trade discount when the list price and single discount rate are given, use the following formula:

A) trade discount times single discount rate
B) list price times single discount rate
C) net price times single discount rate
D) base equals portion times rate

Question 68

When a partial payment is made during the discount period, the amount credited is:

A) subject to interest charges
B) equal to the partial payment divided by the complement of the cash discount rate
C) equal to the partial payment divided by the cash discount rate
D) equal to the partial payment

Question 69

A director of accounts received an invoice for $614.52, dated November 12, with sales terms 4 / 13 ROG. The merchandise described on the invoice was received December 10. Find the cash discount and net amount paid if the invoice was paid January 10.

A) Cash discount:$24.18; net amount: $603.52
B) Cash discount: $79.89; net amount: $534.63
C) Cash discount: $0; net amount: $614.52
D) Cash discount: $24.58; net amount: $589.94

Question 70

The single discount equivalent is the complement of the net price equivalent.

Question 71

Credit terms of 2 / 15, ROG means you have 15 days from the receipt of the goods to pay the invoice and take a 2% discount.

Question 72

A dining room set lists for $7,900.00 and carries a trade discount of 25 percent. of $75.00 is not part of the list price. The net price of the dining room set including freight, assuming a cash discount of 4 percent, is:

A) $7,975.00
B) $7,659.00
C) $7,656.00
D) $5,763.00

Question 73

If a manufacturer offers a discount of 30 / 25 / 5, total discount of 60% is allowed.

Question 74

90 days from October 19 is:

A) January 16
B) January 17
C) January 19
D) January 18

Question 75

An invoice dated June 29, for $1,678.25, with credit terms of 3 / 10, EOM is received by Bailey, Inc. The last day a discount can be taken is:

A) Aug 10
B) July 31
C) July 6
D) Aug 31

Question 76

A dining room set was ordered on August 12, paid for on August 15 and received August 21, and had discount terms of 2 / 10, n / 30, ROG. What is the latest date the cash discount is allowed?

A) August 31
B) August 25
C) August 22
D) September 1

Question 77

The list price of a keyboard is $796. If the trade discount series offered is 5 / 10 / 15, what is the trade discount?

A) $238.80
B) $217.51
C) $557.20
D) $578.49

Question 78

A director of accounts received a bill for $1319, dated July 10, with sales terms 3 / 10 EOM. Find the cash discount and amount due if the bill was paid August 30.

A) Cash discount: $13.19; net amount: $1305.81
B) Cash discount: $131.90; net amount: $1187.10
C) Cash discount: $0; net amount: $1319
D) Cash discount: $39.57; net amount: $1279.43

Question 79

Prepay and add means freight charges have been added to an invoice and the buyer is to pay.

Question 80

An invoice for a laptop computer that cost $625.68 is dated September 15, with sales terms of 3 / 10 EOM. If the bill is paid October 8, find the cash discount and net amount paid.

A) Cash discount: $18.77; net amount: $ $606.91
B) Cash discount: $62.57; net amount: $563.11
C) Cash discount: $18.47; net amount: $614.68
D) Cash discount: $0; net amount: $625.68